BankAmerica Shareholders File Lawsuit Over Alleged Securities Law Violations

Strategic Insights -

BankAmerica Corporation, a multinational banking company, has been hit with a lawsuit filed by shareholders in the United States District Court for the Southern District of New York. The lawsuit, filed on behalf of shareholders who acquired new BankAmerica common stock following the merger with NationsBank, alleges that the company and certain officers and directors violated securities laws by failing to disclose material losses related to a loan to D.E. Shaw. The lawsuit claims that BankAmerica knowingly concealed the risks of the loan, which led to a significant write-off and a substantial drop in the company's stock price.

Key Takeaways:

  • The lawsuit charges BankAmerica and certain officers and directors with violating Sections 14(a) and (e) of the Securities Exchange Act of 1934 and Rule 14a-9 promulgated thereunder, as well as Sections 11 and 12(a)(2) of the Securities Act of 1933.
  • The Complaint alleges that BankAmerica failed to disclose material losses related to a loan to D.E. Shaw, a New York brokerage firm and hedge fund, which led to a $372 million write-off and a significant drop in the company's stock price.
  • The lawsuit claims that shares of New BankAmerica common stock were purchased at artificially inflated prices as a result of the alleged violations, resulting in losses for the plaintiff and other similarly situated shareholders.
  • The Complaint also alleges that the Proxy dated August 4, 1998, contained false or misleading statements regarding the merger and the financial health of BankAmerica.
  • Plaintiff's counsel in this action, Cohen, Milstein, Hausfeld & Toll, P.L.L.C., has significant experience in prosecuting investor class actions and actions involving financial fraud.
  • The firm has offices in Washington, D.C. and Seattle, Washington, and has taken a lead role in numerous important cases on behalf of defrauded investors, with recoveries totaling hundreds of millions of dollars.

Statistics:

  • $372 million: The amount of the write-off on the pre-existing loan to D.E. Shaw.
  • $1.4 billion: The value of the loan to D.E. Shaw.
  • 50 percent: The drop in BankAmerica's third quarter earnings.
  • $5-5/16: The amount by which the BankAmerica stock fell on the day the write-off was announced.
  • 11 percent: The percentage drop in BankAmerica stock following the announcement of the write-off.

Sources:

  • Business Wire. (1998, November 9). The law firm of Cohen, Milstein, Hausfeld & Toll, P.L.L.C. issues notice regarding a securities class action filed on behalf of shareholders of NationsBank.